UK and US in "intense" talks after Trump announces 25% car tariff

Yahoo

29-03-2025

'Intense negotiations' are taking place between the UK and the US after president Donald Trump last night announced a new 25% tariff on all cars and car parts imported into the country.
The new levy will come into effect from 2 April and will apply to both finished cars shipped into the country and car parts imported for vehicles assembled there.
Speaking from the Oval Office late on Wednesday, Trump said "this is very exciting", adding: 'What we're going to be doing is a 25% tariff for all cars that are not made in the United States.'
On Thursday morning, UK chancellor Rachel Reeves told Sky News that the tariff risks hitting the UK economy by pushing up inflation. 'Trade wars are no good for anyone,' she added.
"We are looking to secure a better trading relationship with the United States," said Reeves. "I recognise that the week ahead is important. There are further talks going on today so let's see where we get to in the next few days.'
The effect on the UK could stunt its economic growth, Office for Budget Responsibility chair Richard Hughes told the BBC. He added that it could hit government spending plans and fuel inflation if prices rose.
While the tariffs are bad news for companies that export foreign-built vehicles to the US, Trump claimed the move would lead to "tremendous growth" for the US automotive industry, adding that it would create more investment for US-based car makers and therefore more jobs.
Around eight million cars were imported into the US last year, around half the total sold in the market. Mexico will be the country hit hardest by the new levy. Car makers with production facilities in Mexico include BMW, Ford, Nissan, Volkswagen and Toyota. The US's other top importers are Canada, Germany, Japan and South Korea.
Trump confirmed that the new laws were "permanent", quashing any notion that they would be reversed. But he stated that "if you build your car in the United States, there is no tariff".
The likes of BMW, Mercedes-Benz and Volkswagen already have plants in the US, building key models for both the US and other global markets. BMW's Spartanburg plant in South Carolina, for example, builds the X3, X4, X5, X6, X7 and XM. It will be affected, though, because it builds and imports the 3 Series from Mexico for the US market.
Some car firms have announced investment to expand or open new US facilities in recent months in an effort to spread production globally and avoid tariffs. The Hyundai Motor Group, for example, has invested more than £16 billion to increase its vehicle production in the country, including a new steel manufacturing plant.
The news will come as a big blow to the likes of JLR, for which the US is its biggest market with firm recording big increases in Range Rover and Defender sales in recent years. Mini, too, will be hit, given its models are made in the UK and China.
Other car makers targeting the US that don't have factories across the Atlantic include Cupra – although its models could be manufactured at other Volkswagen Group facilities in the US – and Lotus.
However, the move could also affect domestic US car makers and firms that currently manufacture vehicles there. GM, for example, manufactures a number of vehicles and car parts in Canada, China and Mexico that it then imports into the US, and those vehicles and parts would be hit by the tariffs.
The announcement has been dubbed "disappointing" by the Society of Motor Manufacturers and Traders.
Mike Hawes, the trade body's CEO, called for UK and US representatives to "come together immediately and strike a deal that works for all".
He said: "The UK and US auto industries have a long-standing and productive relationship, with US consumers enjoying vehicles built in Britain by some iconic brands, while thousands of UK motorists buy cars made in America.
"Rather than imposing additional tariffs, we should explore ways in which opportunities for both British and American manufacturers can be created as part of a mutually beneficial relationship, benefiting consumers and creating jobs and growth across the Atlantic."
European Commission president Ursula von der Leyen said the bloc will study the latest announcement. It itself launched heavy import tariffs on Chinese-made electric cars last year.
She said: "I deeply regret the US decision to impose tariffs on European automotive exports.
"As I have said before, tariffs are taxes - bad for businesses, worse for consumers equally in the US and the European Union.
"The automotive industry is a driver of innovation, competitiveness and high-quality jobs, through deeply integrated supply chains on both sides of the Atlantic.
"The EU will continue to seek negotiated solutions, while safeguarding its economic interests."
This new tariff is the latest in a wave of levies introduced by Trump since he took office for the second time. He said he wants to protect businesses and manufacturers in the US.
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